Debt is a far better option than a placing, especially as the share price is so far below asset value. Means when we ramp up the bopd it can be easily paid off and everyone is happy.
A lender is going to lend money based on the book value of the assets and what they think the production will be (i.e. how great a credit risk is this?). There won't neccesarily be a speeding up of things because of a debt facility- it'll be more the case that the institution offering the debt will take a look at the general plan RRL has, and then on the basis of that plan decide how much they're prepared to lend.
I'm apprehensive about the field development (I didn't say it wouldn't happen for sure, just that it's a risk). Just look at Leni's record with other companies. It's all 'jam tommorow', and this could well prove to be the same. I'm using his past performance which is under-delivery, and saying based on that it's likely we'll get under-delivery here too.
Sure, you could say it's a good bit of business, picking up quite a lot of P1-P3 resources on the cheap. But it's only a good bit of business if the oil actually gets pumped out of the ground and sold. Leni won't be dancing to PL's tune though- as the announcement clearly says, we become operators after th initial work programme (providing we take up the full 50%). We're at the mercy of Lenigas to make that work programme happen and I'm just not sure it will. Or at least, I'm not expecting it with any sort of speed. Range are notoriously slow to get any work done, and LGO are like Range, only 10x worse.
Still, it's not been a bad January. Puntland spudded, decent progress in Texas, and PL at least considering debt finance. Roll on February.
RRS Price at posting:
16.5¢ Sentiment: Buy Disclosure: Held
